How to Determine Your Asset Allocation

When it comes to asset allocation, you want to be sure that you are doing it optimally. Determine your asset allocation strategy.

When it comes to asset allocation, you want to be sure that you are doing it optimally. How can you determine this? Let’s take a look.

What is asset allocation?

Asset allocation is when you spread your investments across stocks, bonds, and cash. According to Investopedia:

Your ideal asset allocation is the mix of investments, from most aggressive to safest, that will earn the total return over time that you need.

Asset allocation is not something that is a “one and done” type of scenario. Ideally, you would work with a financial planner to help you change your allocation over time and make sure that it is meeting your needs.

How can I determine what my asset allocation should be?

When it comes to diversifying your portfolio, where you put your assets will depend on your risk tolerance and time horizon. The goal of investing is to minimize your risk while maximizing your return. If you have a high-risk tolerance, then you will be more willing to invest in high-risk choices. This is ideal for those who have years ahead of them who can handle the ups and downs of the market. If you are nearing retirement, this is generally not the option you want to take.

As you get older, reducing risk should be a priority. If you properly diversify your portfolio through different types of assets and investments, you are more likely to reach your goals than if you put all of your eggs in one basket, so to speak.

The two most important aspects of asset allocation are your risk tolerance and your timeline. In order to optimally invest your assets, we recommend that you speak with a fiduciary financial advisor. Fiduciaries are bound by law to work in your best interest, so working with one who specializes in retirement planning is a good idea for your future. While there are no guarantees when it comes to investing, determining the right kind of asset allocation for your particular situation is imperative.

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